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Home ownership is the West’s biggest economic-policy mistake

economist.com

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Re: Home ownership is the West’s biggest economic-policy mistake

#201

Post by yosito »

pc86 wrote: post #193
yosito wrote: post #173

Earlier quoted context omitted.

> Owning your own home is, in my view, the first step towards financial freedom. I don't disagree with you, but owning your own home can also be a step towards financial ruin if you choose the wrong home. I know a few people who bought homes that they ended up losing huge amounts of money on and selling a few years later. Beyond that, it's also a commitment that comes with a huge opportunity cost. If I buy I house in…

> and selling a few years later That might be part of the problem? It's extremely rare to make a profit selling a home less than 5 years after you bought it even in good-but-not-insane markets. Basically unheard of in under 3 years in not-insane markets. If the market slips you're easily looking at 7-8 years to break even. The math of a six-figure, three-decade loan just doesn't support quick flips even just to break…

Sure, you're correct. But there are many things that can force you to sell a house and take a loss.

Re: Home ownership is the West’s biggest economic-policy mistake

#202

Post by username90 »

fergie wrote: post #34

> a generation of young people who cannot easily afford to rent or buy and think capitalism has let them down Thats not some irrational misconception- capitalism has indeed let these people down. Capitalism, a set of social policies that prioritises the needs of capital over the needs of people, is literally a system that is designed to concentrate ownership. Under capitalism the best way to make money is to own, or…

Capitalism is first and foremost a system to organize labour, and it is very efficient at organizing labour so almost every country uses it. Then what happens to the fruit of said labour is up to the people in a democracy, they can vote to tax it heavily and create a lot of social policies like the Scandinavians or they can vote to let most of it go to owners and managers like in USA.

Re: Home ownership is the West’s biggest economic-policy mistake

#203

Post by austincheney »

Contrary to the basic laws of supply/demand housing prices tend to increase as quantity of housing increases.

To see this problem look at current and historical data only. Do not trend for the future.

The reason why this can occur contrary to the most basic principle of economics is because land is a fixed resource regardless of the frequency of housing upon it. Peoples’ perceptions of fixed resources doesn’t change regardless of frequency variations upon them resulting in trends that defy both pricing and availability as suggested by supply/demand.

The problem this causes is bad policy. There is always a perception of housing shortages. Sometimes there are housing shortages but far more often there are plenty of houses that new incumbents cannot afford. That is an availability problem but not a shortage. Building more housing to directly address that concern widens the gap between shortage and availability.

The speed with which that housing is built is a direct correlation to the rate of value increase of existing homes. That increased value drives up property taxes. This change is immediately felt by property owners. For rental properties this change results in a short term loss of capital and a lagging price hike to the renters to make up the difference. That delayed variance of price increase increases demand of ownership without addressing availability.

Here is my real world example:

I live in one of the fastest growing areas of the US. In 1990 my city was less than 450,000 people. The city was considered large but not amongst the largest in the US by a long shot. In 2010 it was around 750,000 and the 2019 estimate put it at about 910,000 making it the 13th largest city in the US.

I bought my house as a foreclosure after the crash in late 2009 (2800sqft) for 129k retail before fees and taxes. In the past few years they projected housing shortages so there is a shift from building hundreds of homes per year to apartments. As a result, last year alone, houses have increased in value 50%. More than month ago the price of lumber dramatically increased and rapid inflation become apparent. In the past month the value of my house has increased by more than 10%. More than hour away my mom’s house has increased by nearly 11% over just the past month and they aren’t even doing any construction there.

EDIT

I am curious to see any real world cases where housing prices went down as a result of building more housing.

Re: Home ownership is the West’s biggest economic-policy mistake

#204

Post by tpm »

luckylion wrote: post #194
tpm wrote: post #171

Earlier quoted context omitted.

> But generally, the bureaucracy is large, the inefficiency and corruption runs rampant, the quality is subpar and they're constantly at risk to be sold off when the next mayor wants to spend money on a new air port or some policy their voters like. I completely believe all of that. It's still much better than here in Slovakia where public housing is pretty much nonexistent, most people own their flat/house outright…

Wouldn't the state have to acquire the land and keep up with building codes as well? Cooperatives are member-owned, so essentially you + 100 other people would get together, each put up a bit of money, get a loan from the bank, and build a house for all of you to live in. They're not-for-profit entities, they exist to apartments to their members. But they're explicitly not the state, so they're not a tool being (ab)u…

> Wouldn't the state have to acquire the land and keep up with building codes as well?

The issue is to acquire land suitable for housing, which is scarce. The suitability itself is defined by various regulations. The state can (and should) change the regulations. The state can (and should) update the building codes, too.

> Cooperatives are member-owned...

Yes that is clear, but as they are explicitly not the state, the state has sadly no incentive to help them. The state also does not help the cities to build housing. The private developers always find a way to build flats, but as you can probably imagine, sometimes corruption can be involved and that makes the resulting product expensive.

Also cooperatives are problably not really trusted here; people fear being taken advantage of, so they mostle care about themselves. Each one for himself, that is our society in a nutshell. See also Covid mortality. Sorry for the off-topic.

> Why aren't more rentals being created in Slovakia? Just because of social stigma of not owning?

Partly that. Also the aforementioned complications mean that new developments are expensive and are marketed as luxury. And the demand for housing is huge so the developers are catering to the high-margin end of market and are not interested in long-term rented property management.

Re: Home ownership is the West’s biggest economic-policy mistake

#205

Post by blacktriangle »

yrgulation wrote: post #78

Property ownership is bad. Rent for life, dont leave inheritance to your children so they can rent for life too. All you need in life is clothing, entertainment, a bit of travel to distract you from your tiny living space, maybe a gadget or two and of course onsite work. Oh and praise from you manager to add meaning to your daily grind. Or so “they” say while “they” amass thousands of properties and massive fortunes…

Welcome to the NWO: "You'll own nothing and like it"

Re: Home ownership is the West’s biggest economic-policy mistake

#206

Post by rwmj »

elric wrote: post #182
dbetteridge wrote: post #174

Earlier quoted context omitted.

I mean the article agrees with you? It primarily talks about the unfairness of the current system, the NIMBY problem reducing housing stock and the issue of regulations intended to curb new building reducing the stock of houses so that only the elite and existing homeowners can afford them. The section on renting/alternatives is mainly just a discussion about alternatives to the current unfair approach and some cases…

> a minimum 5% deposit + 3-5% stamp duty Oh wow. I had to read the rest of your comment twice to understand that you were saying these seem high to you. They seemed really low to me. To put it into perspective, you need a 10-20% deposit in Belgium (depending on various factors) and there's a 6% tax for an old house (10% up until very recently) or 21% for a new house. It's basically impossible to buy a house if you're…

What's the reason for the strange difference between the tax on old and new houses?

Re: Home ownership is the West’s biggest economic-policy mistake

#207

Post by MagnumOpus »

luckylion wrote: post #196
teachingassist wrote: post #177

Earlier quoted context omitted.

> the state generally sucks at doing these things. Most European states do a great job of this - the suck part comes (like in the UK), when the state stops supporting this and a generation of people are left without decent housing options.

I live in Germany, and I can assure you, the state does not do a great job in this regard. I don't know about France, but seeing the satellite cities surrounding Paris, I have some doubts. Where are they doing a great job in Europe?

I have lived in Germany, France, UK and US, and I can assure you that Germany does a comparably great job.

No structural homelessness problem (beyond the rare addiction victim), new social housing being built rather than relying on housing built 60+ years ago, no/few state subsidies to a private rental sector preying on social tenants etc etc. Just because it is not perfect doesn't mean it isn't better than 95% of the alternatives.

One place that does it better is Austria - the Vienna model of social housing provision enables lower classes to live well in what is one of the world's most expensive places to buy housing in.

Re: Home ownership is the West’s biggest economic-policy mistake

#208

Post by jcadam »

pc86 wrote: post #193
yosito wrote: post #173

Earlier quoted context omitted.

> Owning your own home is, in my view, the first step towards financial freedom. I don't disagree with you, but owning your own home can also be a step towards financial ruin if you choose the wrong home. I know a few people who bought homes that they ended up losing huge amounts of money on and selling a few years later. Beyond that, it's also a commitment that comes with a huge opportunity cost. If I buy I house in…

> and selling a few years later That might be part of the problem? It's extremely rare to make a profit selling a home less than 5 years after you bought it even in good-but-not-insane markets. Basically unheard of in under 3 years in not-insane markets. If the market slips you're easily looking at 7-8 years to break even. The math of a six-figure, three-decade loan just doesn't support quick flips even just to break…

Just sold a house in FL I bought in 2019. Realized I made a mistake in buying it - luckily the absolutely insane housing market right now in FL allowed me to get out without losing my shirt.

Re: Home ownership is the West’s biggest economic-policy mistake

#209

Post by JayPeaEm »

jariel wrote: post #189
yrgulation wrote: post #78

Property ownership is bad. Rent for life, dont leave inheritance to your children so they can rent for life too. All you need in life is clothing, entertainment, a bit of travel to distract you from your tiny living space, maybe a gadget or two and of course onsite work. Oh and praise from you manager to add meaning to your daily grind. Or so “they” say while “they” amass thousands of properties and massive fortunes…

I'm down-voting you because you haven't made an argument in the face of the issue. The flaw the assumption is that somehow 'buying' a home that is 15x your annual salary, that takes your entire life to pay off, is some kind of 'freedom'.

Agreed.

I think they're only looking at it from a financial freedom point of view. But I, too, don't see a 30-year keeps-with-inflation anchor as freedom.

Re: Home ownership is the West’s biggest economic-policy mistake

#210

Post by MandieD »

stepbeek wrote: post #53
WalterBright wrote: post #16

Earlier quoted context omitted.

> I agreee that speculation on property solely as an asset is an issue Speculation helps create a liquid market and stabilize prices.

The article lays out that Germany - a market where property isn't speculated on - has stable houseprices. This is in contrast to English-speaking countries where speculation has caused houseprices to grow beyond the reach of most millenials. It doesn't strike me that speculation has led to stable prices here.

Laughs in Franconian dialect

We started thinking about buying when we moved to the Nuremberg area in 2012, and started our serious house hunt in 2014. It took a full year before we managed to get an offer accepted, and we were offering full asking price, because we had to wait a few days to get mortgage approvals instead of having 300k-500k EUR in cash. We ended up with a mid-50s row house that could use new bathrooms and windows in Nuremberg's largest neighboring city/suburb, only because the seller wanted a buyer who she thought would actually live in it themselves... and are keenly aware of our good fortune. We would have to pay about 60-70% more than we did just 5 years ago to get the same thing in livable condition in this location now.

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